Electricity shortage would mean disruption

By KEVIN TAYLOR, political reporter

The Government yesterday warned of social and economic disruption if a dry winter hits electricity supplies.

Finance Minister Michael Cullen told a Greypower meeting in Dunedin there was a "very real prospect" of a dry winter.

That comes on top of an earlier-than-expected rundown of Maui gas, which is leaving thermal generators scrambling for alternative fuel supplies.

Dr Cullen said that if a dry winter eventuated it would "place real stress on our ability to manage our way through" with minimal social and economic disruption.

Even so, he was sure Energy Minister Pete Hodgson would succeed in minimising any adverse effects, as he had done in the 2001 power crisis.

But new electricity use data released yesterday show the country is coming up short in cutting demand and avoiding blackouts this winter.

Consumers were asked earlier this month to cut power use by 5 per cent or risk shortages this winter.

Winter Power Taskforce director Dr Patrick Strange said yesterday that conservation efforts over the last week had resulted in only a 3 per cent saving.

He said that next week he would review the level of savings required for the duration of winter.

Mr Hodgson is being kept abreast of events daily, including receiving information on hydro storage levels and the status of power stations.

National energy spokesman Gerry Brownlee said there was growing debate on whether the 5 per cent target was going to be enough and urged tough and urgent talking from the Government on power savings.

He said it had become even more imperative now after new electricity market figures showed the country's hydro lake storage was at levels similar to those experienced before the 1992 power crisis.

Lake levels were well down on where they should be at this time of year, at 66 per cent of their average.

"If New Zealand is to avoid substantial rolling cuts this winter the Government must act," Mr Brownlee said.

Dr Cullen said in his speech that the question still remained whether the complex electricity market, and proposed changes to it, would deliver enough security of supply in such a small market with its peculiar mix of generation.

It was important to maximise elements of competition within the system to reduce inefficiency and avoid unnecessary costs. But he said the question was whether the existing framework concentrated competition in the right areas - at the generating and retail ends of the market.

It was also questionable whether recent spikes in power prices sent the right long-term pricing signals to encourage enough investment in generation.

"These are not easy issues but are ones we will approach with a proper mix of principles and pragmatism."

* Three weeks out from the Budget, Dr Cullen said he was enthusiastic about increasing Government spending, provided it contributed to social and economic objectives.

The Government's main aim was to build a sound economy with healthy public finances, so the country could afford high-quality public services.

Dr Cullen said there were still political parties that thought public services had to be sacrificed in order to kick-start the economy.